Follow The Money, Wall Street's Been Betting On An Obama Victory For Months

In the last few weeks, pundits have been using every method under the sun to predict the Presidential election from hard statistical data (Nate Silver) to counting lawn signs (Peggy Noonan).

Let's, for just a moment, put all that aside and do things the Wall Street way. Sure, most people in the industry are vocal supporters of Mitt Romney, but are they putting their money where their mouths are?

LPL Financial's Jeff Kleintop has been tracking that specific question over the past year. His analysis, called the Wall Street Election Poll, focuses on specific sectors that are likely to move based on the outcome of the Presidential race.

"I originally put it together to see if poll data actually moved with investing," Kleintop told Business Insider. "On any given day you can see idiosyncracies driving these companies... but over time the election has had an impact."

Around June he noted a swing toward Democratic victory after Obama's healthcare bill was upheld in the Supreme Court. That meant increased investment in industries like construction, home building, health care, food and staples etc.

After the first debate, though, Kleintop noticed a some momentum in the other direction. Coal stocks spiked 26% after Romney mentioned the commodity several times during his strong performance. Other Republican industry favorite include oil and gas, specialty retail, and electric utilities.

Still, the Democras seem to be holding on.

Of course, the Presidential race isn't the only thing to consider. There's also the Senate (from Kleintop's most recent note)

As we have noted in the past, the outcome of the Senate is of key importance in this election. The Republicans are very likely to retain control the House, and increasingly, it appears the Democrats may retain control of the Senate. Markets may fear another two years of a divided Congress... This matters a lot to investors because the 2013 budget is going to have the biggest impact of any budget in decades. The fiscal headwind composed of tax increases and spending cuts already in the law is likely to result in a recession and bear market for stocks if no action is taken. Congress has important decisions to make, and the stakes are very high. The dwindling prospects for Republicans in the Senate may have limited the outperformance by Republican-favored industries.

Kleintop also considers what will happen for the rest of the year given the fact that Congress is going into lame duck mode. Historically, the closer the Presidential election (and this is a close one) the more wildly the market will swing through the rest of the year.

For example, when in 1980, Carter was ahead of Reagan in the polls up to October 26th. Reagan, as we know, eventually won that one, and the S&P 500 went on to range 10% post-election.

While we are in for a lame duck session this year, Kleintop expects that to be offset by the fact that Congress has to face the fiscal cliff. That means action. As a result, he expects the S&P to hold on to its 12% gain for the most part, or see a slight move toward the downside of a few percentage points.